What Is the Federal False Claims Act?

The False Claims Act (FCA) is an act of Congress, passed in 1863 during the American Civil War. The government pressed ahead with the legislation after discovering that arms suppliers were defrauding the Union Army. 

Originally, the legislation stated that companies defrauding the government must: 

• Pay a penalty equal to double the damages done to the government
• Pay an additional fine of $2,000 for each submitted false claim

The government later increased the penalty for violation of the Federal False Claims Act. 

In 1986, the provisions changed so that defrauding entities must: 

• Pay triple the damages incurred by the government
• Pay fines in the region of $5,000 to $10,000 for each false claim

Thus, a federal False Claims Act penalty can be considerable.

Qui tam litigation

Often, the federal False Claims Act and qui tam litigation go hand-in-hand. Private individuals have the right to access financial awards if they help the government recover defrauded money. 

The way it works is simple. A “relator” (usually called a whistleblower) informs the relevant government authorities of the suspected fraud. The government then intervenes and decides whether it is going to prosecute. Sometimes, the government declines to intervene for the whistleblower after a court hearing (even if the whistleblower protests). 

If the government decides to proceed, it will prosecute the case. At the same time, it will come to a settlement with the relator, agreeing to pay a share of the recovered money. 

How big is the award to the relator?

How much the whistleblower receives depends on the circumstances of the case. Typically, the relator receives a percentage of the amount recovered via qui tam action. 

The government pays the relator using the money it receives from the defendant. Legal fees are also recoverable.

Finally, even if the government decides to recover money via other ways than the relator’s particular qui tam suit, they may still be entitled to a share of the money.

When is a whistleblower not allowed to pursue qui tam action?

The False Claims Act outlines several situations in which a relator cannot pursue qui tam action. These include when: 

• The information contained in the qui tam action is already in the public domain
• The government is already pursuing prosecutions related to the relevant false claims
• Somebody else already files a relevant qui tam that covers the case
• The relator is convicted of criminal conduct relating to violations under the False Claims Act
• Making tax claims (FCA does not apply to tax fraud under the Internal Revenue Code)

Making a claim

The False Claims Act contains something called the “knowledge requirement.”

It is not a violation under the False Claims Act to submit a false claim to the government. Critically, the law requires that prosecutors prove that a person made a claim “with knowledge of falsity.” The law does not prosecute individuals who simply made a mistake. 

Knowledge of falsity means that the defendant: 

1. Had actual knowledge that they were breaching their contract with the government
2. Deliberately ignored obvious truths (such as errors in payments made by the government pertaining to the contract)
3. Recklessly disregarded the truth or falsity of information they provided 

Filing a qui tam FCA claim with an attorney

Given the complexities of filing under the federal FCA, many private individuals use an attorney. It is critical to file before the federal False Claims Act statute of limitations for qui tam kicks in. 

This happens after either:

• Six years from the time the fraud was committed
• Three years from the time the government official with knowledge of the facts should have prosecuted the case

Attorneys can help you with all aspects of the case. They begin by helping with filing qui tam complaints. They then work with the government to investigate the allegations of the complaint – usually complete in 60 days.

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